June 2013 Bulletin

 Most Canadian Businesses have been slow to adopt leading-edge technologies. That is not a winning formula, and Canadian Business finds itself playing catch-up on the global stage.

*(Researched from http://www.conferenceboard.ca/hcp/details/innovation.aspx)

Eighty Percent of companies that achieved year over year growth in the last decade focused on their core business. With that in mind, here are some practical strategies to look at that may be of benefit to your company.

1. Find out your core business. - What does your company do to add more value or get more margin than others in your industry?
2. Find innovative expert partners who complement your core business. Benefit:

           i.     Innovative Partners provide a higher level of service for the same or lower cost.

           ii.     Innovative Partners reduce risk by bringing industry expertise that would be cost prohibitive to have in-house.

           iii.     A fixed cost becomes a variable cost that can scale up or down as required.

Example 1: Partner with an IT Company who knows how to manage information and communication technology to decrease costs and take those savings and help you innovate around your core.

Example 2: Partner with a Benefit's Provider who can provide cost effective benefits and improve employee retention.

   i.       Do clients have to call to get information that's already in your system? Do they have to mail you to give information to your firm?               

   ii.      Sometimes connecting by phone or mail makes sense and is cost effective but sometimes it creates needless friction and starts the clients looking for other solutions.

     4. Make employee's happier by working smarter not harder.

           i. For example: reduce repetitive tasks, by automating tasks or reduce data entry by having clients/suppliers enter information online.

      5. Create innovation by getting a deep understanding of the information you have.

           i. Invest in tools that will allow you to see patterns in your database.

        For example: An insurance company has information on thousands of businesses in several industries. But usually a sales person is looking at one client at a time.  The company compares clients by industry they find that 70% of industry have product x and y. Now they can develop a targeted strategy for reaching the other 30%.

        Itility aims to be your partner in driving value from your technology investments. Dudley can help with each of the strategies above.  Please talk to Paul if you would like to be introduced to Dudley or Call Dudley directly at 403-630-9829 and tell him The Benefit Specialist sent you.

Dudley Fagan, B.Sc.

www.itility.ca

Dudley Fagan is business innovator and IT manager, who has been helping Calgarian businesses optimize the use of technology and use the savings to innovate in their industry for over 15 years. His company is Itility- IT Peace of Mind.

Our next article will be BYOD:Bring Your Own Device: Benefits and Gotcha's for Small Business.

However, when an employee is also a shareholder, the tax implications can be reversed. In certain cases, the Canada Revenue Agency (CRA) has determined that a cost-plus benefit arrangement should be characterized as a taxable payment to a shareholder (which is not deductible by the employer) rather than a private health services plan.

This goes back to a 2004 decision of the Tax Court of Canada, Spicy Sports Inc. v. R. In this case, the shareholder-employee was reimbursed by his employer (the company he owned) for elective knee surgery performed in the United States at a cost of approximately $38,000. The CRA auditor determined that the shareholder-employee received payment under the cost-plus arrangement in his role as shareholder - not as an employee.

The court upheld the auditor's decision, concluding that it was unlikely the company would have provided the cost-plus plan to an arm's length employee. As such, the payment in question was categorized as a payment to a shareholder and not as a payment to an employee under a private health services plan. As a result, not only was the payment to the shareholder fully taxable but the company could not deduct the payment from its income.

CRA policy released since the Spicy Sports decision provides further clarification regarding its current position on this issue. In summary:

When an employee-shareholder receives a benefit under a cost-plus plan, there is a presumption that the shareholder-employee receives the payment by virtue of his or her shareholdings in situations where the shareholder can significantly influence business policy. Not with standing this presumption, a cost-plus plan provided to persons in their capacity as employees (not shareholders) may be accepted by the CRA if it passes the following test:

• the benefit is available to all employees, including those who are neither a shareholder nor related to a shareholder (regardless of whether they have chosen to participate in the plan); or
• the benefit is not available to all employees, but there is a logical reason to exclude some employees; or
• it is reasonable to conclude that the benefit has been provided as part of a reasonable remuneration package for the individual as an employee; or
• the benefit is comparable to that offered to non-shareholder employees of businesses of a similar size who perform similar responsibilities.

If you provide cost-plus benefits to shareholder-employees and the plan does not satisfy the CRA test enumerated above, consider modifying the plan terms to ensure payments are taxed as intended.

As briefly touched on in the article above, it is very important that each employee receives in writing, notification of his/her Beneco annual maximum. The Canada Revenue Agency (CRA) insists upon this rule and will penalize companies who do not abide by it. If you need assistance or have any questions regarding the article above please contact me at 403-547-5236.